Question Period Note: CHARITABLE REGISTRATION AND REVOCATION RELIGIOUS-BASED CHARITIES

How the CRA determines charitable status and how revocations are determined with particular regard to religious-based charities?

• The Canada Revenue Agency (CRA) grants registered charity status to organizations that apply and meet all the registration requirements of the Income Tax Act.

• In order to be registered as a charity, an organization must be constituted exclusively for charitable purposes and devote all of its resources to activities that further those purposes.

• Charitable purposes fall into four categories: the relief of poverty, the advancement of education, the advancement of religion, and other purposes beneficial to the community that the law regards as charitable.

• The CRA never considers factors such as faith or religious denomination to select a charity for audit.

SUPPLEMENTARY RESPONSE

• The CRA uses a risk-based approach to promote and enforce compliance within the charitable sector, which involves using audits and other non-audit interventions based on the risk of non-compliance.

• When minor non-compliance is identified through an audit, the CRA generally makes use of education or compliance agreements.

• Sanctions or revocation are only reserved for serious or repeated cases of non compliance.

The Canada Revenue Agency (CRA) is responsible for promoting and enforcing compliance within Canada’s charitable sector, which is comprised of approximately 86,000 registered charities and approximately 4,500 other qualified donees.

Through its understanding of the charitable sector population, the CRA has developed and implemented a risk-based and multi-streamed approach involving audits and various non-audit interventions. The risk-based and multi-streamed approach is designed to provide the appropriate balance of compliance treatments, which include an array of activities ranging from reminder and nudge letters, to conducting audits, which can result in outcomes ranging from education letters, to sanctions, and revocations. This approach is based on the understanding of how risk is dispersed through the charitable sector population.

A priority of the CRA, through its risk-based approach, is to address high risk non compliance, which has a severe negative impact on the charitable sector. These repercussions can also ultimately impact charitable donors, beneficiaries, and Canada’s tax base. The CRA focuses on enforcement in these instances and employs its audit resources to identify and to address the full extent of suspected intentional, repeated, and/or aggravated non-compliance.

However, the CRA also focuses on promoting voluntary compliance across the majority of the charitable sector that is not engaged in high risk non compliance. In order to address non compliance with this segment of the charitable sector, it employs a variety of non audit interventions in order to provide registered charities the chance to voluntarily self correct any non compliance.

Registering a charity is a comprehensive process, which includes in-depth research and analysis of an applicant organization’s structure and mode of operation.

In order to be registered as a charity, an organization must be constituted exclusively for charitable purposes and devote all of its resources to activities that further those purposes. Charitable purposes fall into one or more of the following categories: the relief of poverty, the advancement of education, the advancement of religion, and other purposes beneficial to the community.

The term charitable is not defined in the Income Tax Act, so the CRA relies on common law (court decisions) to determine what is charitable.

A registered charity’s purposes must also provide a tangible benefit to the public as a whole, or a significant section of it. In addition, purposes and activities that are illegal in Canada or contrary to Canadian public policy are prohibited.

The CRA applies the same standard whether the applicant organization intends to operate a religious organization, or carry on any other type of charitable activity.

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